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How Did They Do It?

18 November 2015 by lberuti

This morning, DTCC published their weekly statistics regarding volumes and open positions on single name CDS and credit indices. If the increase in long risk positions on iTraxx Main ($3.4bln across the 8 most recent series and $3.1bln on series 24 alone) is consistent with market sentiment and the observed bases (ie the difference between the quoted value of an index and its theoretical value derived from the prices of its constituents) which are turning more and more negative (iTraxx Main’s quoted risk premium is tighter than its theoretical value), the numbers were a tad more surprising on the other credit index families. They all show an increase in short risk positions, and in the case of CDXIG a substantial decrease ($4.5bln) in long risk positions. With such results, one would expect index bases to creep higher, but they remain stubbornly stuck at their most negative levels. On CDXIG, the basis (which stands at -49cts or 10bps) is now worth well in excess of 10% of the index risk premium (which stands at 82bps).